Absa Group Ltd., the parent company of Absa Bank Kenya PLC, on 11th March reported improving revenue growth for the 2019 financial year, with earnings growing slightly.
“We delivered a resilient performance against a challenging macroeconomic backdrop. We maintained balance sheet momentum and growth was broad-based across most businesses,” said Mr Daniel Mminele, Absa Group Chief Executive Officer.
Absa Group revenue increased 6% while headline earnings, the measure most analysts use to gauge profit, rose 1% as impairments increased. “Our revenue growth is showing an improving trend, with strong deposit growth of 12% and customer loan growth of 9% for the Group,” said Absa Group Financial Director Jason Quinn.
Slowing Economy
Overall, Absa’s balance sheet, revenue and earnings growth were in line with peers after lagging for a number of years. Absa Regional Operations (ARO) business, comprising Absa Group’s African operations excluding South Africa, delivered strong financial performance in 2019 with earnings growth of 16% (12% in constant currency), enhancing the overall Group’s position.
“We are pleased with the results of our Absa Regional Operations and their contribution to Absa Group’s overall performance, having maintained double-digit growth and growing our headline earnings. We look forward to continuing to grow our revenue market share on the continent over the coming years,” said Peter Matlare, Chief Executive Absa Regional Operations.
He said Absa Group is optimistic about the future and the opportunities that lie ahead united under ‘one Absa’ across African markets. The aim, he said, is to develop strong, digital-first financial systems in a sustainable manner and to contribute positively to the development of our communities in which we operate.
Absa Group’s results come after the completion of its brand transition from Barclays. “We are excited about the journey ahead as Absa Bank Kenya. Collectively our values and journey is one of striving to be customer-obsessed, acknowledging the strength of our people and delivering results sustainably,” Absa Kenya Managing Director Jeremy Awori said.
Absa launched its growth strategy in March 2018 after Barclays PLC ceased to be the controlling shareholder in the Pan African banking group. Absa is on track to complete its separation programme, one of the largest in the banking sector in terms of size and complexity, on time and within budget by the middle of 2020.
Retail and Business Banking
RBB South Africa continues to show signs of a turnaround as the unit gained ground in key areas, recording increases in customer loans and deposits. Revenue momentum increased and costs were well contained. However, an increase in impairments impacted on earnings.
- Gross loans and advances grew by 7% to R530bn
- Deposits grew by 10% to R373bn
- Non-interest income grew by 6%
- Cost-to-income ratio improved to 57.7% from 58.4% in 2018.
- Customer growth of 1% to 9.7m
- Market share growth in retail deposits and retail loans and advances, including personal loans, new home loans and vehicle finance.
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Corporate and Investment Banking
CIB’s earnings growth was driven by strong performances in countries outside South Africa, which partially offset a decline in earnings in South Africa.
- Continued growth momentum in ARO with total income growing 15% (12% in constant currency) to R7.4bn
- Solid income growth from Corporate Bank franchise up 9% (8% in constant currency) to R10.6bn
- Strong growth momentum in the trade finance business in SA, with a CAGR of 19% in the last four years.
Absa Regional Operations (ARO)
- Revenue grew by 14% (11% in constant currency)
- Pre-provision profits increased by 17% (14% in constant currency)
- Cost-to-income ratio improved to 57.8%
- While separating, ARO has grown its retail primary customer base in 2019 to 1.5 million customers
Outlook
South Africa’s macro environment has consistently disappointed for the past five years. Together with our Absa Regional Operations, the outlook remains muted, compounded by the recent outbreak of coronavirus which will have an impact on the global macro outlook, and which will also have implications for the economic prospects in our other operating regions.
“We will continue to drive the execution of our strategic objectives with agility, and take advantage of emerging opportunities while managing risks more effectively in response to changes in the operating environment,” said Mr Mminele.
